Alert Steel (Pty) Ltd (in liquidation) v Mercantile Bank Limited

Alert Steel (Pty) Ltd, a steel wholesaler, obtained overdraft facilities of R104 million from Mercantile Bank Limited, secured by a notarial bond over its movable assets, cession of book debts, and insurance cessions. After Alert Steel entered voluntary business rescue in May 2014, the bank cancelled the facilities, demanded repayment, and perfected its security. The company was provisionally and later finally wound up. The liquidators, with the Master’s authorisation, sold all the company’s secured assets to West Lake Trade and Investments (Pty) Ltd for R100 million. In terms of the sale agreement, the purchase price was paid directly to the bank and applied to reduce Alert Steel’s indebtedness. Additional amounts collected under the security were also retained by the bank. The bank ultimately did not prove a claim at creditors’ meetings. Alert Steel (in liquidation) sought repayment of R105 226 381.17 from the bank, alleging that the liquidators acted ultra vires and that the bank was unjustifiably enriched.

The appeal was dismissed with costs, including the costs of two counsel.

The case clarifies that ultra vires conduct by liquidators does not automatically entitle an insolvent estate to recovery; the strict requirements of enrichment actions must still be satisfied. It reinforces the position of secured creditors in insolvency and limits the use of the condictio indebiti and condictio sine causa where payments merely discharge existing secured debts.